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CH7 - STRATEGIES FOR INNOVATION
Transcript of CH7 - STRATEGIES FOR INNOVATION
Corporations IBM decided to advance the PC architecture. However the third-party hardware and software suppliers that had helped establish the original architecture did not follow IBM’s lead.
Information The IBM PC: Virtual success
or failure? By 1985, IBM’s shared had grown to 41 percent. However its share fell soon after as Compaq and DELL surged ahead.
Insourcing Virtual companies conduct much of their business through the marketplace, thus virtual companies can harness the power of market forces to:
What’s special about virtual company? The virtual companies that have demonstrated staying power are all at the center of a network that they use to leverage their own capabilities.
The virtuous virtuals have carefully nurtured and guarded the internal capabilities that provided the essential underpinnings of competitive advantage.
The Virtuous Virtuals In both wrong decisions are costly. Exists mainly on the internet and does business through a web site and email
Relying on telecommunications and computer technology for its operation
A group of independent companies as one entity through telecommunications and computer technology
Virtual Corporations Safari notebook computer: The company used Marubeni Trading Co., which partnered with Matsushita Electrical Industrial Co. to produce the computer.
MCI: Partnerships with more than 100 companies allowed MCI Communications Corp. to obtain major contracts.
Examples IMB and Apple: formed a virtual corporation for mutual benefit.
Corning Inc.: created a virtual corporation with 19 partnerships in 1993.
Power book notebooks: Partnering with Sony helped create a less expensive version
Innovations are pursued independently form other innovations.
Their benefits can be realized only in conjunction with related, complementary innovations.
Types of Innovation Strategies
for Innovation How Information is
transferred? Today few companies can afford to develop internally all the technologies that might provide an advantage in the future
Technologies are purchased from other companies
Acquired through licenses partnerships, and alliances
Critical technologies are developed internally
Getting the right balance is crucial
Choosing the Right organizational form Develop
Their offerings incentives can make a virtual company more responsive but can also make the company vulnerable Integrated, centralized companies do not generally reward people for taking risks, but they do have established processes for settling conflicts and coordinating all the activities that are necessary for innovation. An alliance can achieve some of the coordination of an integrated company but, like players in a virtual network, the members of an alliance will be driven to enhance their own positions, and over time their interests may diverge.
The challenge for managers is to choose the organizational form that best matches the type of innovation they are pursuing.
Specifications that are captured in industry standards and design rules
Can be transferred effectively from one company to another
Easily duplicated, and it has little natural protection.
Some can be protected by intellectual property rights
Codified Information Knowledge that has been used, but has been not fully articulated.
It tends to diffuse slowly, and only with effort and transfer of people.
Tactic Knowledge Autonomous
Virtual organizations are dependent on the other members, over whom they have no control.
Decentralized virtual organizations can manage the development and commercialization tasks very well.
Systemic When industry standards do not exist the coordination of a systematic innovation is difficult to implement.
By virtue of the size and scope, as integrated company may be able to advance a new standard simply by choosing to adopt a particular technology Once a new standard has been established, virtual organizations can manage further innovation quite well.
A simple rule of thumb applies: when innovation depends on a series of interdependent innovations (systematic) interdependent companies will not coordinate to reach those innovations.
The case of industry standards. IBM experience in the PC market illustrates the strategic importance of organization in the pursuit of innovation. Key development activities that depend on one another must be conducted in house to capture the rewards from long-term investment.
Most successful virtual companies
-Good technical design Sun Microsystems
-Sun’s Scalable Processor
-Strong internal capabilities
-Worked with alliance partners
Lean production system
“The delivery of ‘untethered communication’ ”
Is the technology systemic or likely to become systemic in the future?
What capabilities exist in the house and in the current supplier base?
When will needed technology be available?
Motorola Example Conventional battery technologies (NI-Cd) have become commodities, and there are many suppliers.
Few if any suppliers can offer the more advanced technologies Motorola needs.
The most exotic technologies such as fuel cells and solid-state energy sources are not yet commercially viable from any supplier.
How should Motorola organize to obtain each of the technologies it might need?
Under what circumstances should the company buy the technology from a supplier and when should it form alliances or joint ventures?
When should Motorola commit to internal development of the technology?
Issues to consider before deciding Motorola could lose the ability to influence the direction of the technology.
Motorola might lose the ability to pace the technology to bring it to market at a competitively desirable time.
If such technologies are or become systemic and Motorola has no control over them, the company may not be able to advance related technologies and design features to achieve its goal.